4 BackgroundAbu Dhabi implemented DRGs successfully starting in August All inpatients (except long term care and dental) for all products are paid under DRGs since January Weights have been updated for the first time in April 2011, the second time in October 2012 and the third time now in September 2014.In general, worldwide uses DRG weight updates to ensure that payments reflect evolving treatment patterns in a timely fashion. US Medicare updates DRG weights annually while Scandinavia only updates its weights every two years due to technical and volume challengesThe most significant technical challenge to the DRGs in Abu Dhabi has been poor provider data quality, where not all services provided are documented on the claim. This leads to distort the weights, which leads some DRGs to be too high, and others too low.

7 Weights update consultation steps with Providers and PayersDRG Panel Workshop - February 4, 2014a workshop to explain the DRG weight process and related changes and to listen to concerns and questions from the industryConsultation Template Feb 5, 2014Following the workshop, we distributed standardized data template to the industry to assess impact in a quantitative, data driven and standardized manner – see AppendixAs of March 4, 2014, of the total of 32 hospitals in ABU Dhabi, we have received responses from 21 hospitals with a total market share of 93% based on revenueIndividual Provider Meetings with HAAD April – June, 2014Following receipt of the standardized templates, we set up individual meetings with key hospitals and payers to further assess and understand the impact of the DRG changes on their facilitiesWe concluded there is an urgent need for a reimbursement adjustment for the high cost devices and consumables to accompany the 2014 DRG weight update.

11 Published Methodology of High Cost Devices (HCPCS) Reimbursement (1/3)High Cost HCPCS Add On Reimbursement for the DRG Update Effective September 15th, 2014HAAD developed DRG weights update and presented them to the market in February One of the major recommendations of the market was to address high cost devices (HCPCS). In response, HAAD decided to implement the weight update as presented along with addressing the issue of high cost HCPCS as below.For a short period of time, specific high cost devices will be entitled for add-on payment in addition to DRG payment. Following input from hospitals and the collection of specific high cost devices, HAAD has developed the following approach for reimbursing certain, approved devices on top of the normal DRG payment. Keep in mind the goal was to reimburse a limited number of high cost and/or new technology devices that are not fully recognized in the DRG weights. With the collection of actual cost data from the policy outlined below, ultimately these device costs can be more accurately reflected in future updates, as approach advised by both 3M and observed in the US Medicare program

12 Published Methodology of High Cost Devices (HCPCS) Reimbursement (2/3)The following (Table A) identifies the devices that are eligible for add-on payment, High Cost Listed HCPCS. Generally, the list is based upon the data provided by the hospitals and the criteria that they are “high cost” thus our threshold for inclusion was AED 5,000 for market price average. The DRG claim is eligible for the Add-on payment when the total cost of these specified HCPCS in the claim is 5,000 AED or more.For listed devices, the provider will be eligible for an add-on payment of 75% of the difference between the price and the HCPCS portion amount built into the DRG as listed on the spreadsheet.Add-on Payment = 75% X (Total Price for High Cost Listed HCPCS in a DRG claim - DRG HCPCS portion AED)Where Total Price for High Cost Listed HCPCS in a DRG claim = Sum(ActivityCost*Quantity)for all High Cost Listed HCPCS reported in a claimAnd DRG HCPCS portion AED = the DRG specific HCPCS portion % in (Table B) X DRG payment

13 Published Methodology of High Cost Devices (HCPCS) Reimbursement (3/3)In case of outlier payment, it will account for the received add-on payment as below:Outlier payment = (Cost – Base Payment –HCPCS Add on Payment– Gap) x MarginalClaiming rules:The use of High Cost Listed HCPCS is subject to prior authorisation by the PayerThe Add-on Payment is claimed under the Service Code 98For all High Cost Listed HCPCS activities in both PriortRequest and ClaimSubmission transactions Provider reports the ActivityCost observation as per routine reporting requirements:Providers submit their original invoice for the HCPCS as attachment to the claim submission at the HCPCS activity levelProvider must maintain the documentation supporting the reported ActivityCost readily available for audit75% reimbursement amount was selected based on the experience of the US Medicare High Cost Devices programme handles similar add on payments and also a goal to support an efficient payment system.

16 Entity Name: License ID:Evaluation for the 2014 Proposed DRG Weight Update and Outlier Payment Changes. Due date Feb 11th, 2014As requested in the Feb 4th, 2014 DRG Panel meeting, HAAD would appreciate receiving your view on modeling the impact of the DRG update by choosing the appropriate option and commenting on the grid below which will be kept confidential. In assessing the impact, please remember the base rate applied to the DRG is a separate issue, so we appreciate your keeping this analysis on the following:1- New proposed 2014 DRG weights (see attached Excel file)2. Changing the outlier gap payment from 50,000 AED to 25,000 AED for Basic, and 25,000 AED to be the max for Thiqa and Enhanced3. Allowing to negotiate different outlier gap and marginal figures by DRG code for Enhanced and Thiqa claims.Entity Name: License ID:CategoryItemQuestionOption 1Option 2Option 3CommentsOverall annualized revenue impact on your hospital1Using a one year distribution of inpatient claims and applying the new proposed DRG weights, what is the overall revenue impact on your hospital/group of hospitals? Please add the impact % in the Comments sectionpositivenegativeNeutral2Adding the two outlier payment proposed changes to new proposed DRG weights, what is the overall revenue impact on your hospital/group of hospitals? Please add the impact % in the Comments sectionPositiveNegativeHighlight specific DRG weight changes that solve existing problems3Will the proposed DRG weight /outlier changes that will increase revenue for specific specialty area encourage change of behavior or increase private investments? Please specifyAgreeDisagreeHighlight specific DRG weight changes that create a problem4Will the proposed DRG weight /outlier changes that will decrease revenue for specific specialty area encourage change of behavior or decrease private investments? Please specifyIdentify specific potential competitive issues that could arise from the update5Are there specific services and specialties where your hospital may be disadvantaged relative to other hospitals? If so, please identify and describeFor Payers and Providers6Do you support the implementation for both DRG weights and outlier payment changes to be March 15th, 2014?7Do you support the implementation of only DRG outlier payment changes to be March 15th, 2014?8Do you see DRG weight /outlier changes will improve access for your members/patients to health care services in Abu Dhabi? Please specify9Do You have other comments you want to share?